HomeMy WebLinkAboutRDA LOAN AG 1ST INTER 08-21-95RDA NO. 3
8-21-95
dATE'
AUGUST 15t 1995
Inter-Com
WILLIAM A. HUSTON, EXECUTIVE DIRECTOR TUSTIN COMMUNITY
TO: REDEVELOPMENT AGENCY (TCRDA)
FROM: RONALD A. NAULT, TREASURER (TCRDA)
SUBJEC~ WORKING CAPITAL LOAN AGREEMENT WITH FIRST INTERSTATE BANK
RECOMMENDATION:
Adopt Resolution No. RDA 95-5 approving a one year working Capital
Loan Agreement with First Interstate Bank for the Town Center
Project Area in the amount of $750,000 and for the South Central
Project Area in the amount of $2,500,000 and authorizing the
Executive Director to execute the Agreement on behalf of the
Agency.
FISCAL IMPACT:
The estimated net interest cost of the loan is $82,000.
DISCUSSION:
The Health and Safety Code of the State of California is the
governing code for redevelopment agencies. The Code dictates that
tax increment revenues generated within a Redevelopment Agency
Project Area can only be transferred to the Agency to the extent
that the Agency has incurred debt that will be repaid from the tax
increment and that the debt must be equal to or greater than the
total available tax increment. There are many allowable debt
alternatives for an Agency to utilize but, the most typical form of
debt is the issuance of long term bonds. Loans between agencies
and cities, short term bank loans and even notes between developers
and agencies are acceptable debt activities that will support an
Agency's claim to its' annual tax increment.
In the past, we have utilized loans between the City and the Agency
to secure annual increment. Because of the cash flow needs of the
General Fund and the onerous legislative changes contained in AB
1290 begining fiscal 1993/94, the Agency repaid the outstanding
City loans and secured a working capital loan for $3 million from
First Interstate Bank for fiscal year 1994-95. A third party loan
is a much stronger debt transaction that will stand any review by
the State or the county as to the validity of the debt and
substantiate authority for receipt of current tax increment. These
Page 2
August 15, 1995
Working Capital Loan Agreement/First Interstate
types of transactions are only intended to serve the needs of the
agency in the short term. It is the intent of the agency to
procure a more typical long term financing alternative when it
becomes more practical to the agency.
The proposed loan is a simple one year working capital transaction
collateralized by a deposit equal to the current loan balance. The
rate is proposed at seventy percent (70%) of First Interstate
Bank's floating prime rate, which is the prime rate as published
daily in the Wall Street Journal, currently 8.75 percent plus a fee
of .25 percent of the loan amount, $8,125. This will be offset by
interest earnings on the collateral deposit, currently paying
between three and five percent. The net cost to the Agency of about
2.52 percent is very competitive with current short term rates.
In 1993 the City's Audit Committee selected First Interstate Bank
for its general banking needs after reviewing proposals from
several institutions. First Interstate Bank was selected to fund
this transaction because of the competitiveness of their banking
proposal and their familiarity with the Agency which greatly
simplified the loan process.
In summary, staff has reviewed the needs of the Agency and the City
for the coming fiscal year and strongly recommends the acceptance
of the conditions of the loan proposal and the adoption of
Resolution RDA No. 95-5.
Treasurer
Tustin Community Redevelopment Agency
RAN:ph
Attachment
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RESOLUTION NO. RDA 95-5
A RESOLUTION OF THE REDEVELOPHENT AGENCY OF THE CITY OF
TUSTIN, CALIFORNIA, APPROVING ACQUISITION OF A $3,250,000
WORKING CAPITAL LOAN FROM FIRST INTERSTATE BANK OF
CALIFORNIA
The Redevelopment Agency of the City of Tustin
does hereby resolve as follows:
·
The Redevelopment Agency finds and determines as
follows:
ae
The Redevelopment Agency requires and has
sought a $3.25 million dollar ($3,250,000)
transactional loan for normal working capital
requirements of the South Central Project
Area, ($2.5 Million) and the Town Center
Project Area ($.75 Million)
Be
First Interstate Bank of California has
offered the Redevelopment Agency such a loan.
Ce
The general terms and conditions of the loan
documents offered by First Interstate Bank of
California are reasonable and acceptable.
II. The Redevelopment Agency of the City of Tustin
approves and accepts the general terms and
conditions of the loan documents offered by First
Interstate Bank of California as presented in the
August 7, 1995 letter from Anthony R. Gabriele,
Assistant Vice President, Orange County Corporate
Banking, et al.
III. The Executive Director and/or Director of Finance
are authorized to negotiate the final terms and
conditions of the loan and, thereafter, to execute
all necessary documents related to said loan.
PASSED AND ADOPTED by the Redevelopment Agency of
the City of Tustin at a regular meeting held on the
day of August, 1995.
ATTEST:
Jim Potts
Redevelopment Chairperson
Valerie Crabill
Chief Deputy Clerk
a:wrkngcap, rso
First
Int e
Bank
First Interstate Bank
of Calitornia
Orange County Commercia, ,.,enter
5000 Birch Street. Suite 10.000
Newport Beach. CA 92660
714 263-4377
Fax: 714 253-4288
August 7, 1995
Ronald A. Nault
Finance Director
City of Tustin/
Tustin Community Redevelopment Agency
300 Centennial Way
Tustin, CA 92680
Dear Mr. Nault:
First Interstate Bank of California (FICAL) is Pleased to make available to the Tustin Community
Redevelopment Agency (TCRA) the follow,lng credit arrangement:
FACILITY AMOUNT AND PURPOSE:
A transaction loan not to cxceed Three Million Two Hundred Fift)., Thousand dollars ($3,250,000)
for normal working capital requirements.
RATE:
70% of FICAL's floating prime rate.
FEES:
1/4 of 1% of the line amount.
COLLATERAL:
Three (3) separate FICAL Certificate of Deposits (Collateral) in the follmving amounts xvith the
following maturities
.
$1,000,000 maturing December 31, 1995
$1,000,000 maturing April 30, 1996
$1,250,000 maturing June 30, 1996
The balance of the Collateral can be reduced as principal pa.vments retire the outstanding loan;
however, the Collateral must ahvavs equal 100% of the outstanding loan balance.
August 7, 1995
Page 2
REPAYMENT SCHEDULE'
Interest monthly in addition to principal payments of $1,000,000 on 12-31-95, $1,000,000 on 4-
30-96 and balance at maturit),. Pa?ncnts will be derived from incremental tax revenue funded to
MATURITY:
June 30, 1996.
FINANCIAL STATEMENT REQUIREMENTS:
1) CPA audited financial statements shall be submitted x~4thin 120 days of the fiscal ),ear end.
SPECIAL REQUIREMENTS:
1) Signed statement from TCRA counsel ac 'knowledging that the terms and conditions of the
subject credit facility comply x~4th the bylaws of the TCRA.
2) Resolution adopted by the Tustin City Council authorizing the subject credit facility and the
terms and conditions of the credit facility. Thc resolution shall also state thc individuals of TCRA
authorized to' execute FICAL documents related to the credit facility.
3) TCRA shall maintain its principal domestic operating relationship with FICAL.
4) This agreement shall be governed by California law.
5) In the event that action is brought to enforce the terms of this agreement or pa)wnent of thc note
or notes hereunder, costs and reasonable attorneys' fees shall be awarded to the prevailing part),.
6) All terms set forth in any note, guarantee, securitx agreement or other document executed in
connection with the facilities provided hereunder shall be in full force and effect.
7) Failure on the part of TCRA to pay any sum of thc principal or interest when due, or any breach
or default by TCRA of or under any term, condition, provision, warranS, or representation made in
this or any other agreement with FICAL, any appointment of a trustee as to a substantial portion of
the assets of TCRA, or any le~? or attachment, execution or similar process, an), act on the part of
TCRA of insolvency, general assignment for thc benefit of creditors, voluntary or involuntary
filing under bankruptcy law, or any attachment or suit for taxes against TCRA, by Federal or State
government, or department thereof, or if for an5' other reason FICAL shall deem itself insecure,
shall at the option of FICAL, make immediately due and payable all sums loaned hereunder,
without presentation, demand, protest, or further notice of any kind, regardless of the terms of an)'
promissory note and/or security agreement evidencing the loan.
This commitment letter is not meant to be, nor shall it be construed as, an attempt to define all of
the terms and conditions involved in this financing. Rather, it is intended only to outline certain
basic points of our understanding around which the final terms and documentation are to be
structured.
August 7, 1995
Pagc 3
Further negotiations adding to or modif).,ing the general scope of these major tcrn~s shall not be
precluded by the issuance of this commitment letter and its acceptance by you. FICAL's
commitment to make this facility available is subject to thc execution of loan documents and other
documents acceptable to FICAL and its counsel.
Kindly indicate your agreement to this commitment by signing the enclosed cop3' and returning it to
us. This offer shall expire at 3:00 p.m. on August 25, 1995 unless prior to such time we have
received such copy executed by you.
Sincerely,
Anthony R. Gabrldle, Jr.
Vice President
Orange County Corporate Banking
Acknowledged and accepted by:
Tustin Community Redevelopment Agency
Executive Director
Date
Director of Financc Date